Division of Revenue Bill hearings: Transport, Education and Health Departments' Capital Spending

NCOP Finance

03 March 2008
Chairperson: Mr T Ralane (ANC, Free State)
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Meeting Summary

The Department of Transport was considered, focusing on the capital spending for years 2007/08, 2009/10, 2011/12. An in-depth report focusing on expenditure of the Gautrain project was presented to the Committee. Special emphasis was given to the inefficiencies of DoRA (Division of Revenue Act) as it related to late draw-downs by municipalities. The Committee was informed that the bus rapid transport model was the model largely adapted by most cities hosting 2010 World Cup events. The Committee was concerned around the issue of late draw-down by municipalities and the negative effect on other sectors of service delivery.  Flexibility of DoRA was also of primary concern, and some Members were worried about municipalities being allowed to adapt their own models. Late withdrawals would be addressed as a matter of urgency and could possibly be rectified with legislation. The need for different models from the different cities regarding transport was outlined.

The Department of Health briefed the Committee on the Division of Revenue Bill 2008, focusing on allocation to different projects and sectors in financial years 2007/08, 2009/10.  Special emphasis was given to the taking over of mortuaries from the Police as well as section 25(2) of DoRA. Members voiced concern on training of new Health Professionals, despite the healthy grant given to the department. The issue of backlogs in service delivery in the Limpopo province was also highlighted. The role of the Department of Public Works in the upkeep and development of infrastructure was a focal point, and the Chairperson queried claims that there was insufficient capacity. Progress of provinces would be monitored. Some provinces employing other agencies were commended. A team would visit Mpumulanga, and although money would not be withheld from provinces steps would be taken in respect of under expenditure.

The Department of Education placed special emphasis being placed on key objectives in terms of analysis, evaluation & assessment. Members were presented with an outset of the MTEF allocations per province highlighting the funding priorities. Members raised issues on no-fee schools, under spending in the Gauteng province and weekend schooling. The poor maintenance of capital stock and insufficient infrastructure development in schools were of primary concern, as this related to capacity. A report will be given to the office of the Chairperson to investigate where the money for infrastructure and the maintenance of capital stock was allocated.

Meeting report

 

Division of Revenue Hearings:
Department of Transport (DOT) Briefing

Ms Mpumi Mpofu, Director General: Department of Transport, delivered the comprehensive presentation focusing on areas of concern as highlighted by the Minister of Finance in his Annual Budget Speech. Focus was placed on the major Capital Budget while the other smaller issues in the presentation would serve to be more informative in nature.

A breakdown in the capital spending for years 2007/08, 2009/10, 2011/12 was presented to the Committee. There would be major increases in expenditure in the rail and roads sector while the Public Transport System (PTS) was given marginal, inflationary increases. Spending on the Gautrain project would decrease substantially in time as the project was of a short term nature. Ms Mpofu made special mention that the last leg of the Gautrain project between Midrand and Tswane would only be completed post 2010 as there had been several issues regarding the expropriation of land on that route of the project. She explained that in order for the Gautrain to be an effective mass-mover several lines had to be revised to be connected to the Metro Rail and Bus services, which in turn had a budgetary impact. An integrated ticket system would be implemented so as to ensure that commuters would only have to buy one ticket when travelling to multiple destinations. Ms Mpofu said that difficult issues such as land expropriation, utilities and design had caused the project to fall behind schedule by four months but that the project would soon be on schedule again.

Ms Mpofu highlighted that the DoRA (Division of Revenue Act) system presented inefficiencies in regards to municipalities claiming payments. Municipalities should, as good practice, request payments as agreed, but this has not always transpired. She explained that the municipalities often requested payment only at the end of their financial years, creating huge singular payout amounts. The reason for this was generic inefficiency in DoRA, which should allow for penalties in situations where there was a delay in the claiming of funds.

Bus rapid transport was seen and accepted by most cities as an efficient mode of mass transport and had been accepted as a integral part of their models for transport for the FIFA 2010 World Cup. Ms Mpofu said that the different cities’ models of transport differed only slightly from each other. With reference to expenditure in non host cities, she noted that this had to be  allocated for small project such as off- ramps. Despite progress being slower in certain host cities none of these presented a particular crisis. She concluded by saying that FIFA required certain guarantees, such as set out waiting times, for which experts had to be deployed to assist the Department.

Discussion
The Chairperson expressed his concern on the issue of late draw-downs by municipalities and commented that this was something that needed to be addressed as a matter of urgency.

Mr D Botha (ANC, Limpopo) noted in the cases where municipalities did not use their draw-downs, own funds were used, which in turn has a negative effect on service delivery. He stated that the draws had to be made on a monthly basis, and posed the question whether late draws were the effect of invoicing delays.

Mr E Sogoni (ANC, Gauteng) expressed his appreciation for the report by the Department but also expressed his concern as to the late draw downs by the different municipalities. He suggested that a balance needed to be struck for maintaining flexibility in relation to payouts, and that the timeframes needed to be adaptable. The Department needed to ensure that municipalities complied with the set-out framework.

The Chairperson commented that certain problems were inhibiting progress and needed to be addressed. He questioned why cities were allowed to choose their own models without consulting the Department.

Ms Mpofu answered that the Department’s transport strategy gave a framework for host cities but that variance was inevitable and necessary. Using Cape Town as an example, she commented that the rail transport system was very well developed and differed to that of other cities. She explained that the Department could not be too rigid as models for each city needed to be tailor made.

Mr Kenneth Brown, Director: Provincial Budget Analysis, National Treasury (NT), commented that in cases where creditors were not paid in time municipalities were not doing their jobs in terms of pay-outs. He posed the question as to whether the situation might be rectified by means of legislation. The current inefficiencies were a direct result of a lack of capacity within the municipalities. He also focused attention to the fact that municipalities were often not aware of the fact that money was paid out to them. Municipalities were often not forthcoming with simple things like cash flow projections. He explained that quarterly reports from auditing firms regarding municipalities were questionable as to whether they served the purpose that they were supposed to. Despite there being some flexibility within DoRA it certainly needed close revision. 

The Chairperson stated the Gautrain project should be treated as a special project in all deliberations. He highlighted that roads were a serious problem in the Limpopo Province as very little was allocated to this. There were serious concerns as to money that had been misspent or simply disappeared. He added that some farm roads were built by the Department of Agriculture and not by the Department of Roads and Transport, creating further complications in the province.

Mr Botha expressed his concern that the ATB in Limpopo did not have to report to the Department and had a free hand. This raised the issue of accountability when considering that a large amount of R 25 Million seemed to have disappeared.

Mr Sogoni stated that the under spending by the Northern Province needed to be addressed urgently, and asked the Chairperson to see to that.

Ms Mpofu commented that the rationalisation of transport funds was a very complex issue seeing that there were many bodies within both national and provincial government involved. Funding streams were in effect very diverse and presented the Department with a great challenge.

Department of Health (DOH) Briefing
Mr Gerrit Muller, CFO, Department of Health,  gave account of the National Tertiary Services Grant, the Health Professions Training and Development programme, Hospital Revitalization Programme, Comprehensive HIV & AIDS conditional Grant and the Forensic Pathology Service Grant as allocated for the periods 2007/08 and 2009/10, proportionately per province.  He explained that all Forensic Pathology Laboratories were now under the management of the DOH and had been taken over from SA Police Services (SAPS) Many new mortuaries had been built and were to be taken into use very soon, hence the reduction in grants. The Department would help in providing the necessary sensitivity around this issue.

Mr Muller complained that according to Section 25(2) of DoRA the Department was rendered “toothless” and expressed his concerns around the Health Professions Training and Development Grants.

Discussion
Mr Sogoni, referring to section 9(b)(2) of DoRA, asked what the implications of this would be on both Transport and Health sectors, and what mechanisms were in place to allow for flexibility without allocations being under spent.

Mr E Manyosi (ANC Eastern Cape) commented that despite allocations for the training of new Health Professionals the situation on the ground was looking dismal: clinics were over-used,  and there were too few nurses to provide adequate care. He also expressed concern as to the age limit being imposed on home-based care.

Mr Botha said that in the Limpopo province there were serious backlogs in service delivery and invoicing. He wanted to know whether the Department of Health had communicated or set out requirements to the Province’s 450 clinics. If money were taken from one Department to be given to another, as was sometimes done by municipalities, this could have negative consequences from the Department from which it was taken. 

Mr Muller said that in regards to Mpumalanga Province’s problems, the Minister did send a team to meet with the MEC of the province and that they were looking into the problems in that region. He commented that a new HOD was appointed and things should be starting to improve. Mr Muller said that there was close monitoring, and that reports were being requested after every payday. The expected over-expenditure in the Health sector was expected to be in the vicinity of R 600 million. However, discussions were being held with the National Treasury to try to resolve the problem. He suggested, with reference to section 9 (1) (b) of DoRA, that more pressure should not be put on provinces, as this might compromise accountability.  In terms of flexibility he suggested that a possible relaxation of 10% from the central line may be prudent.  The Health Professions Training Grant was focused more on the higher level of training and did not fund training itself but rather the additional costs associated with  training. In this fiscal year R10 million had been allocated to the training and development of new nurses. He assured the Committee that the problems regarding the Limpopo Province would be taken up in a meeting on 15 March.

Mr Sogoni commented that, with reference to section 14(3)(a)(2) of DoRA, that the National Department should assist the provinces in terms of expanding capacity and that it had been done successfully in some other departments.

The Chairperson stated that the Department of Public Works (DPW) had no reason to say that it had insufficient capacity as this was catered for. He said that the Committee would be visiting Mpumalanga from 18 to 20 March, during which time issues regarding the Department of Public Works and Health would be discussed. Treasury should also be part of the discussion so as to ascertain whether they recognised and accepted the constraints within the Department of Public Works.

Mr Muller explained that Section 14 (3)(a)(2) dealt with the Infrastructure Grant. Some places,  such as Coega in the Eastern Cape, had been very innovative in capital projects by utilising other agencies. Mr Muller assured the Committee that the Act was being enforced and if need be would be enforced next year too. He reasoned that money should not be withheld but if there was under spending the necessary steps would be taken.

Mr B Mkhaliphi (ANC, North West) asked the Department to make a programme of action available in respect to Mpumalanga, as they would like to assist in making the province work. He exclaimed that most of the problems within Mpumalanga related to management issues.

Mr Sogoni said that Municipalities were experiencing problems in regards to the Health budget and expressed concern that if this were to be mixed with other bodies it might become too complex for them to handle.

The Chairperson said that the Department of Health’s fourth quarter would be monitored very carefully, to establish how the provinces were performing. He agreed with Dr Muller that grants should not be withheld but should be monitored and the provinces assisted in terms of efficiency.   Baselines in Limpopo were declining since the Committee’s last visit, from 24.1% to 25.9%, but ideally should be 26%. He expressed worry that officials in Limpopo were not talking to each other.

Department of Education (DOE) Briefing
Mr Philip Benadé, CFO, Department of Education,  said that his Department had prepared a little more than was requested by the Committee, including a general overview of the finances of the Department of Education as well as the allocations on the conditional grants. He explained that the Department had serious consultation with the Treasury requesting additional funding for certain conditional grants.

He highlighted the Medium Term Expenditure Framework (MTEF) key objectives in terms of analysis, evaluation & assessment.  The total sector bid amounted to R17.8 billion. He also gave account on expenditure on school infrastructure, National School Nutrition Programme (NSNP), expansion of inclusive education, expansion of grades, Early Childhood Development (ECD) and personnel and text books.

An outline of the MTEF allocations per province was given highlighting the funding priorities. Mr Benadé further reported on the Conditional Grants per province, and the monitoring of Conditional Grants. He presented on the outcomes at 31 December 2007, planned outcomes over the 2008 MTEF, implementation of Minimum Norms for the National School Nutrition Program, planned outputs over the 2008 MTEF, and DoRA: Infrastructure (see attached presentation for detail)

Discussion
The Chairperson expressed his appreciation, saying that the Committee was very optimistic about the Department of Education.

Mr Sogoni commended the Department of Education for implementing many of the recommendations made by Treasury.

Mr B Tolo (ANC Mpumalanga) raised the issue of no-fee Schools, asking how allocations to specific schools were decided upon and the criteria used.  He also raised concern about under spending on personnel by the Gauteng province and asked whether this was due to the baseline for the province that was increased.

Mr Botha wanted to know what the developments were around the issue of weekend schools.

Mr Brown commended the department on its efforts, but expressed his concern as to the infrastructure program in schools. Capacity seemed to be an issue as despite discussions money was not being allocated appropriately. Money given to provinces for backlogs was not being allocated either. He noted that the Infrastructure budget was very low and that the Budget Council was trying to address this issue. In total an amount of R2.7 billion had been allocated to infrastructure grants to provinces. Only two provinces, Kwazulu Natal (KZN) and Western Cape, had allocated the money, and even added more. KZN was given R581 million in three years and added 1.3 billion, the Western Cape was given around R119 million and allocated R405 million. He explained that infrastructure development in reality was improving capacity, which was why this needed urgent action. The figures were based on discussions that were held in the first week of February 2008. Mr Brown gave the assurance that this would be looked into and reported back to the Committee. Maintenance of capital stock was a very big issue in the Department of Education, as the maintenance budget was extremely low.

The Chairperson requested that the information be given to his office so he could investigate where the money was in reality being allocated. If it was being allocated elsewhere, this must immediately be stopped.

Mr Benadé assured the Committee that the Department had allocated R7.2 billion over the 2008 period to infrastructure.

The Chairperson commented that the issue of infrastructure was critical and needed to be addressed as soon as possible.

The meeting was adjourned.

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